BILL NUMBER: AB 855	CHAPTERED  09/27/99

	CHAPTER   492
	FILED WITH SECRETARY OF STATE   SEPTEMBER 27, 1999
	APPROVED BY GOVERNOR   SEPTEMBER 27, 1999
	PASSED THE ASSEMBLY   AUGUST 30, 1999
	PASSED THE SENATE   AUGUST 26, 1999
	AMENDED IN SENATE   AUGUST 24, 1999
	AMENDED IN SENATE   AUGUST 16, 1999
	AMENDED IN SENATE   JUNE 29, 1999
	AMENDED IN SENATE   JUNE 17, 1999
	AMENDED IN ASSEMBLY   APRIL 6, 1999

INTRODUCED BY   Assembly Member Cardenas
   (Principal coauthor:  Assembly Member Runner)
   (Coauthors:  Senators Escutia, Hughes, and Solis)

                        FEBRUARY 24, 1999

   An act to amend Sections 8277.5 and 8277.6 of the Education Code,
relating to child care and development services.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 855, Cardenas.  Child care and development programs.
   (1) Existing law establishes the Child Care and Development
Services Loan Guaranty Fund and the Child Care and Development
Facilities Direct Loan Fund in the State Treasury which are
continuously appropriated funds, to be used for the purpose of
guaranteeing and providing loans for the purchase, development,
construction, expansion, or improvement of licensed child care and
development facilities.  Under existing law, facilities eligible for
loan guaranty programs include, among others, full-day and part-day
child care and development facilities and family day care homes
serving more than 6 children.
   This bill would instead provide that facilities eligible for loan
guaranty programs include licensed full-day and part-day child care
and development facilities and family day care homes.
   (2) Existing law sets forth the purposes for which loans and loan
guarantees for improvements may be used.
   This bill would also authorize loans and loan guarantees for
improvements to be used for the expansion or preservation of existing
child care operations and would require the Department of Housing
and Community Development to determine whether the improvements are
necessary.
   (3) Existing law provides priority for loan guarantees and direct
loans to facilities that serve households with incomes not exceeding
75% of the local median income.
   This bill would define a "lower income" family for the purposes of
providing program priorities as a family with an adjusted monthly
income that is at or below 75% of the state median income.
   (4) Existing law places certain restrictions on loan guarantees
and direct loans to family child care homes serving more than 6
children and requires a family child care home provider to provide
evidence from the community care licensing division that the repairs,
renovations, or additions are required to maintain the license or
obtain a license for more than 6 children.
   This bill would delete these provisions.
   (5) Existing law requires the Department of Housing and Community
Development to adopt regulations for serving family day care homes
efficiently including making loans available from the Child Care and
Development Facilities Direct Loan Fund to local microenterprise loan
funds and other lenders who may relend the funds to eligible family
day care home providers.
   This bill would provide that a loan to a family day care home
provider shall not be subject to a 50% investment restriction.
   (6) Under existing law, the interest rate of a loan may vary based
on the ability of the borrower to repay the loan, but is required to
be reasonable and designed to obtain prompt and full repayment of
the loan by the borrower.
   This bill would instead require the interest rate for a direct
loan to be set at the time of application, fixed for the term of the
loan, and set at a rate equivalent to the Surplus Money Investment
Fund rate in effect on December 31 of the preceding calendar year.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 8277.5 of the Education Code is amended to
read:
   8277.5.  (a) For purposes of this section "department" means the
Department of Housing and Community Development.
   (b) Subject to appropriation in the annual Budget Act, the Child
Care and Development Facilities Loan Guaranty Fund and the Child Care
and Development Facilities Direct Loan Fund are hereby established
in the State Treasury.  The Superintendent of Public Instruction may
transfer state funds appropriated for child care facilities
enhancement and the proceeds derived from any future sales of
tax-exempt child care and development facilities bonds into these
funds.
   (c) Notwithstanding Section 13340 of the Government Code, all
moneys in the Child Care and Development Facilities Loan Guaranty
Fund and the Child Care and Development Facilities Direct Loan Fund,
including any interest on loans made from the fund, or loan
repayments to the fund, are hereby continuously appropriated to the
department for carrying out the purposes of this section and Section
8277.6, respectively.  Any loan repayment or interest resulting from
investment or deposit of moneys in these funds shall be deposited in
the applicable fund, notwithstanding Section 16305.7 of the
Government Code.  Moneys in the funds shall not be subject to
transfer to any other fund pursuant to Part 2 (commencing with
Section 16300) of Division 4 of Title 2 of the Government Code,
except the Surplus Money Investment Fund.
   (d) (1) Moneys deposited in the Child Care and Development
Facilities Loan Guaranty Fund shall be used for the purpose of
guaranteeing private sector loans to sole proprietorships,
partnerships, proprietary and nonprofit corporations, and local
public agencies for the purchase, development, construction,
expansion, or improvement of licensed child care and development
facilities, and for the purpose of administering the guarantees of
these loans.  The loan guarantees shall be made by the department or
by a public or private entity approved by the department, in
accordance with the priorities established by the department, as
described in Section 8277.6.  The full faith and credit of the State
of California is not pledged to the Child Care and Development
Facilities Loan Guaranty Fund and the state is not liable for loan
defaults that exceed the amount of funds deposited with the Child
Care and Development Facilities Loan Guaranty Fund.
   (2) A loan guarantee made pursuant to this section may not exceed
80 percent of the principal and interest amount of a private sector
loan guaranteed by the fund and shall be used only to guarantee a
private sector loan for the purchase, development, construction,
expansion, or improvement of facilities described in Section 8277.6
and for related equipment and fixtures, but shall not be used
primarily to refinance an existing loan or for working capital,
supplies, or inventory.  A loan guarantee for improvements shall be
limited to those improvements necessary, as determined by the
department, for any of the following purposes:
   (A) To obtain, maintain, renew, expand, or revise a child care
license.
   (B) To make necessary health and safety improvements.
   (C) To make seismic improvements.
   (D) To provide access for disabled children.
   (E) To expand upon or preserve existing child care operations.
   (3) The aggregate amount of outstanding loan guarantees shall not
exceed four times the amount in the Child Care and Development
Facilities Loan Guaranty Fund.
   (4) A loan guarantee made pursuant to this section shall be for
the term of the loan or 20 years, whichever is less.  Security for
the guaranteed loan may include a deed of trust, personal guarantees
of shareholders and partners in the case of proprietary borrowers, or
other reasonably available collateral.  These liens may be
subordinated to other liens.  Default provisions and other terms
shall be reasonable and designed to obtain prompt and full repayment
of the guaranteed loan by the borrower.  Reasonable loan guarantee
fees and points may be charged to applicants and borrowers by any
public or private entity approved by the department, as described in
regulations adopted by the department.
   (5) A loan guarantee made pursuant to this section shall only be
granted if the applicant agrees to provide child care in a facility
for a period of 20 years or the term of the guaranteed loan,
whichever is less.
   (6) A loan guarantee made pursuant to this section terminates 120
days after the lender's receipt of notice that the recipient has
either ceased making payments or providing child care in the facility
for which the loan was made, or both, unless the lender takes action
to accelerate the loan.  If a family day care provider ceases to
operate, but retains its three-year license, the provider shall give
notice to the department and the lending institution of its intention
to resume offering child care services for the term of its license,
or shall provide notice of its intention to cease providing child
care services.  The Child Care and Development Facilities Loan
Guaranty Fund is not liable for a default occurring after the loan
guarantee has ended.
   (e) (1) Moneys deposited in the Child Care and Development
Facilities Direct Loan Fund shall be used for the purpose of making
subordinated loans directly or through a public or private entity
approved by the department to sole proprietorships, partnerships,
proprietary and nonprofit corporations, and local public agencies for
the purchase, development, construction, expansion, or improvement
of licensed child care and development facilities, and for the
purpose of administering these loans.  Loans shall be made in
accordance with the priorities established by the department as set
forth in Section 8277.6.  The full faith and credit of the State of
California is not pledged to the Child Care and Development
Facilities Direct Loan Fund and the state is not liable for loan
defaults that exceed the amount of funds deposited in the Child Care
and Development Facilities Direct Loan Fund.
   (2) A loan made pursuant to this section may not exceed 50 percent
of the total amount of investment for the purchase, development,
expansion, or improvement of eligible child care and development
facilities as described in Section 8277.6 and for related equipment
and fixtures, but may not be used primarily to refinance an existing
loan, for working capital, for supplies, or for inventory.  A loan
made pursuant to this section may not exceed 20 percent of the total
amount of investment if the same facility is also utilizing a loan
guarantee pursuant to subdivision (c).  Investment for purposes of
this paragraph means the total cost paid or incurred by the applicant
in constructing, renovating, or acquiring a facility.  A loan for
improvements shall be limited to those improvements necessary, as
determined by the department, for any of the following purposes:
   (A) To obtain, maintain, renew, expand, or revise a child care
license.
   (B) To make necessary health and safety improvements.
   (C) To make seismic improvements.
   (D) To provide access for disabled children.
   (E)  To expand upon or preserve existing child care operations.
   (3) The term of a loan made pursuant to this section may not
exceed 20 years.  Security for the loan may include a deed of trust,
personal guarantees of shareholders and partners in the case of
proprietary borrowers, or other reasonably available collateral.
These liens may be subordinated to other liens.  The payment
provisions, late charges, and other terms may vary based on the
ability of the borrower to repay the loan, but shall be reasonable
and designed to obtain prompt and full repayment of the loan by the
borrower.  The interest rate for a direct loan shall be set at the
time of application, fixed for the term of the loan, and set at a
rate equivalent to the Surplus Money Investment Fund rate in effect
on December 31 of the preceding calendar year.  Reasonable loan fees
and points may be charged to applicants and borrowers, as described
in regulations adopted by the department.
   (f) Funds appropriated for the purposes of this section and
Section 8277.6 shall be made from funds that are not designated as
meeting the state's minimum funding obligation under Section 8 of
Article XVI of the California Constitution.
  SEC. 2.  Section 8277.6 of the Education Code is amended to read:
   8277.6.  (a) For purposes of this section "department" means the
Department of Housing and Community Development.
   (b) The department shall administer the Child Care and Development
Facilities Loan Guaranty Fund and the Child Care and Development
Facilities Direct Loan Fund.  The department may administer the funds
directly, through interagency agreements with other state agencies,
through contracts with public or private entities, or through any
combination thereof.  If the department determines that a public or
private entity is capable of making child care and development
facilities loans or loan guarantees, the department may delegate the
authority to review and approve those loans or guarantees to the
public or private entity.  The department is authorized to enter into
an interagency agreement with the Trade and Commerce Agency to carry
out the purposes of this section and Section 8277.5 by utilizing the
services of small business financial development corporations
established pursuant to Chapter 1 (commencing with Section 14000) of
Part 5 of Division 3 of the Corporations Code.  Toward this end, the
department is authorized to transfer funds from the Child Care and
Development Facilities Direct Loan Fund to the California Economic
Development Grant and Loan Fund established by Section 15327 of the
Government Code and to transfer funds from the Child Care and
Development Facilities Loan Guaranty Fund to the Small Business
Expansion Fund established by Section 14030 of the Corporations Code.
  Those funds shall be deposited into a Child Care Direct Loan Fund
Account and a Child Care Loan Guaranty Fund Account hereby
established in the respective funds.  Notwithstanding anything to the
contrary in Chapter 1 (commencing with Section 15310) of Part 6.7 of
Division 3 of Title 2 of the Government Code and Chapter 1
(commencing with Section 14000) of Part 5 of Division 3 of the
Corporations Code, the funds in these accounts shall be administered
in compliance with the requirements of this section and Section
8277.5.
   (c) Eligible applicants for the loan guaranty program and the
direct loan program shall include, but not be limited to, sole
proprietorships, partnerships, proprietary and nonprofit
corporations, and local public agencies that are responsible for
contracting with or providing licensed child care and development
services.  Eligible facilities shall include licensed full-day and
part-day child care and development facilities and family day care
homes serving more than six children.
   (d) Loan guarantees and direct loans for family child care homes
shall not be made for the purpose of purchasing a home or any real
property.
   (e) The State Department of Education shall provide input
regarding program priorities that shall be considered in the funding
of applications by the department.  These priorities shall include,
but are not limited to, the following:
   (1) Geographic priorities based on the extent of need for child
care and development supply-building efforts in different parts of
the state.
   (A) Not less than 30 percent of the loan guarantee and direct loan
obligations shall benefit providers located in rural areas, as
defined in subparagraph (B).  If the amount of qualified applications
from rural providers is insufficient to satisfy this requirement,
the excess capacity reserved for rural providers may be made
available to other qualified applications according to the policies
and procedures of the department.  The remaining 70 percent of funds
shall be available to rural or urban areas and other priorities in
accordance with this subdivision.
   (B) For purposes of subdivision (a), rural communities are defined
by any county with fewer than 400 residents per square mile.
   (2) Age priorities based on the extent of need for child care and
development supply-building efforts for children of different age
groups.
   (3) Income priorities shall include families transitioning to work
or other lower income families.  For purposes of this section,
"lower income" shall have the same meaning as "income eligible" as
set forth in Section 8263.1.
   (4) Program priorities based on the extent of facilities needs
among specific kinds of providers, including those that contract to
administer state and federally funded child care and development
programs administered by the State Department of Education, providers
who have lost classrooms due to class size reduction or other state
or local initiatives, or providers that need to expand to meet the
needs of a child care initiative for recipients of aid under Chapter
3 (commencing with Section 11200) of Part 3 of Division 9 of the
Welfare and Institutions Code, or any successor program.
   (f) The program priorities shall reflect input from
representatives of diverse sectors of the child care and development
field, financial institutions, local planning councils, the Child
Development Programs Advisory Committee, and the State Department of
Social Services for purposes of identifying communities with high
percentages of recipients of aid under Chapter 3 (commencing with
Section 11200) of Part 3 of Division 9 of the Welfare and
Institutions Code, or any successor program, who need child care to
meet work requirements.  The department shall assess and report
annually, commencing within 12 months of implementation of this
section to the Legislature, after consultation with the State
Department of Education, on the performance, effectiveness, and
fiscal standing of the Child Care and Development Facilities Loan
Guaranty Fund and the Child Care and Development Facilities Direct
Loan Fund.  The report shall include information on the number of
defaults, the types of facilities in default, and a review of the
adequacy of the set-aside for rural areas specified in paragraph (1)
of subdivision (e).
   (g) The department shall adopt regulations and establish
priorities, forms, policies and procedures for implementing and
managing the Child Care and Development Facilities Loan Guaranty Fund
and the Child Care and Development Facilities Direct Loan Fund and
making the loan guarantees and direct loans authorized hereunder
consistent with priorities provided by the State Department of
Education.  To the extent feasible, the department shall use
applicant fees and points to cover its administrative costs.  The
department may utilize an amount of money from the Child Care and
Development Facilities Loan Guaranty Fund and the Child Care and
Development Facilities Direct Loan Fund, as appropriate, for
reasonable administrative costs in any given fiscal year.  Unless an
appropriation for administrative costs is made in the annual Budget
Act that exceeds the following limits, administrative expenditures
shall not exceed 3 percent of the amount appropriated to each fund in
the Budget Act of 1997.
   (h) The department shall adopt regulations for serving family day
care homes that serve more than six children efficiently and
effectively, including, but not limited to, making loans available
from the Child Care and Development Facilities Direct Loan Fund to
local microenterprise loan funds and other lenders who may relend the
funds in appropriate amounts to eligible family day care home
providers or by authorizing a specified amount of guarantees of small
loans by local microenterprise loan funds and other lenders serving
eligible family day care home providers.  A loan to a family day care
home provider made pursuant to this subdivision shall not be subject
to the 50-percent investment restriction contained in paragraph (2)
of subdivision (e) of Section 8277.5.
   (i) The department may adopt regulations for the purposes of this
section as emergency regulations in accordance with Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code.  For the purposes of the Administrative
Procedure Act, including Section 11349.6 of the Government Code, the
adoption of the regulations shall be deemed to be an emergency and
necessary for the immediate preservation of the public peace, health
and safety, or general welfare, notwithstanding subdivision (e) of
Section 11346.1 of the Government Code.  Notwithstanding subdivision
(e) of Section 11346.1, any regulation adopted pursuant to this
section shall not remain in effect more than 180 days unless the
department complies with all provisions of Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code, as required by subdivision (e) of Section 11346.1 of
the Government Code.
